Gold Heads for Weekly Loss as Odds of October Rate Hike Fall
Gold fell more than 2% over the week amid a strong dollar and rising yields, as the probability of an October rate hike dropped to 26% from around 70%.
Gold traded near $4,182.44 per ounce by 1128 GMT, down over 2% for the week, under pressure from a strong dollar and rising U.S. Treasury yields. U.S. gold futures rose 0.2% to $4,212.40, according to Reuters.
The odds of a U.S. rate hike in October fell to around 26% from nearly 70% earlier in the week, according to the CME FedWatch tool. Ole Hansen of Saxo Bank attributed the prevailing anxiety to the rising opportunity cost of holding gold against concerns that higher yields could damage parts of the economy.
Kyle Rodda of Capital.com said U.S. jobs data will be crucial for rate expectations, adding that a strong reading could boost the chances of a rate hike. Gold had fallen 0.6% to $4,154.78 per ounce by 0205 GMT, down over 3% for the week, while U.S. futures stood at $4,184.00, down 0.4%, according to Reuters citing Zawya.
Silver, platinum, and palladium were also heading for weekly losses. Investors in the region track these movements as gold is part of their hedging portfolios, and because the direction of U.S. interest rates determines the metal's appeal compared to fixed-income instruments.
What do these terms mean?
FedWatch tool: A tool tracking market expectations for U.S. interest rates based on traders' contracts. Opportunity cost: The return an investor misses out on when holding a non-yielding asset like gold. Futures contracts: Agreements to buy or sell an asset at a predetermined price at a later date.
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